Tuesday, February 23, 2010

Bomb-dowsing hucksters in hot water

One of the biggest obstacles with selling pseudoscience products is that they don't work. That may go unnoticed for something little like a headache cure, but people pay a lot more attention for something big, like devices labeled as bomb detectors.

Jim McCormick, managing director of British firm ATSC, was arrested for selling $85 million of dowsing equipment marketed as bomb detectors to the Iraqi government. As Steve Cuno writes, reliance on these useless devices has killed hundreds of people.

While the Iraqi government is currently threatening to sue ATSC for the fiasco, it's painful to think the bureaucrats who authorized the purchases aren't sharing the blame. The device looks like a car antenna suspended in a way that will let it drift to the left or right. How loose were the purchasing standards to allow one of these things to be acquired, let along $85 million worth?

I thought dowsing for power lines was bad enough, but this trumps it in both idiocy and danger.


Monday, February 22, 2010

Should Washington save the newspaper industry?

Professor Bob McChesney and journalist John Nichols* recently appeared on PBS to promote a scheme they have outlined in their new book The Death and Life of American Journalism: The Media Revolution that Will Begin the World Again.

McChesney and Nichols argue that the American newspaper industry is crumbling and that could mean the end of democracy in America. They say the founding fathers wanted newspapers subsidized to keep the flow of ideas moving and provide a watchdog on government corruption. They have outlined an expensive voucher system that would provide every community in America with it's own newspaper.

There's a lot of little painful details McChesney and Nichols expressed that are tempting to cover, but I don't want to lose sight of the big picture. It's easy to spot the hatred print reporters have for our cousins in the broadcast world, there's labeling of "public notices" as a subsidy instead of an advertisement and there's the idea that we had the "correct" number of people employed in journalism before, and laying people off always shows decline and injury, but never progress or efficiency.

The good points

McChesney and Nichols are correct that the media plays a role in keeping our republic alive. Bruce Bueno de Mesquita argues that fair elections are not enough to have a true democracy. It also requires freedom of assembly and freedom of the press. Without the other two, there's no way for an opposition party to mobilize and get its message out.

So that means the media provides a positive externality, and some economists believe things with positive externalities should be subsidized. That's a debatable topic, but it's an acceptable position to take.

I'm glad to see that McChesney and Nichols are advocating for a voucher system over a system directly controlled by the government. There is the obvious consequence of a conflict of interest when reporting on government issues. In addition, a voucher system would let the public choose which newspaper gets their share of the funding. This is superior to something like PBS or NPR. Neither of these attract a large audience with their constant beg-a-thons, dull news stories and outdated musical performances.

However, it's naive to think there will be a way to isolate a public media system from political influence. Who chooses what newspapers are eligible for the vouchers? How much funding will there be in a given area? How often are the vouchers paid? There is a lot of room for corruption to slip in.

McChesney and Nichols like to list the abolitionist press as an example of when journalists influenced American politics, and claim it shows that they can be free of political influence. I'd like to remind them that journalists also did the complete opposite, and rallied support for the revolutionary war by printing lies about atrocities committed by British soldiers.

This was before the nation was founded, so of course a reasonable person could say that that's irrelevant to this issue of funding. But perhaps the founding fathers were such fans of the press in the first place because they could remember using it as propaganda to gain public support for the revolution. I really don't know enough about the press at that time, but McChesney and Nichols' example of the abolitionist press wasn't enough to prove their was no government influence of the press through these subsidies.

The proposed cost and the historic cost

McChesney and Nichols said their plan will cost about $30 billion. That's a ridiculously high amount of money for this program, but read closely how McChesney justifies it:

"We went back and looked at the size of the public subsidy that the US government had for journalism in the first half of the nineteenth century and if we had the same percentage of GDP today dedicated to journalism subsidy as they did in the United States routinely in the first 75 years of our country's history it would be roughly 30 billion dollars."

There's a lot of escape hatches built into that sentence, such as only including 1800 to 1850 and saying it "routinely" equaled $30 billion in that time. The most striking oddity in that statement is that McChesney has not merely adjusted for inflation, he's also adjusted for GDP.

This is a strange way to play with numbers, and it looks like he's thrown GDP in there to bulk the figures up. Since McChesney didn't give us any hard data to work with, I had to un-adjust$30 billion for GDP for both 1800 and 1850 to compare to the 2005 GDP, the most reliable year I had access to. With the GDP adjustment removed, this gave me a yearly inflation-adjusted subsidy of $17.5 million for 1800 and $117.7 million for 1850. These are rough numbers because McChesney himself was vague about the figures, but it shows how big his GDP adjustment skewed things.

So what does that mean in plain English?

When McChesney "adjusted" for GDP, he's letting you assume that this is a fair way to update the numbers for modern times. An average person may think this is OK to do. Let's break it down into logical chunks to see how fair that really is.

Let's assume McChesney was correct with his figures, which would mean the newspaper subsidy was 0.2 percent of the GDP in the early nineteenth century and should remain 0.2 percent today at $30 billion. Does that seem like a smart thing to do?

Not really, if you factor in technology. McChesney is taking the figures for the total subsidized media of that time period and saying the same share of our GDP should go toward subsidizing a single branch of the media. In 1800, there was no radio, television or Internet to spread news around. As new technology comes along, it replaces a lot of the old ways of doing things. But in McChesney's world, the newspaper industry should be preserved and protected from both the market and competition with broadcast media.

So basically he's taken the amounts used to subsidize the entire media industry, and wants to use a comparable portion of our total wealth to pay for just the newspaper portion of our media. Since we've gotten wealthy, it's a much bigger piece.

This is like saying we should have the same percentage of our population working in agriculture as we did 200 years ago, so let's keep subsidizing farms that don't use tractors until we get back to 1800 levels.

Because broadcast and Internet news would still exist privately alongside a bloated newspaper industry, this scheme would make the media much larger than it's ever been before.

As a former newspaper reporter and editor, I would benefit from this plan in the short run. However, since I live in the same country that would have to funnel about 0.2 percent of it's GDP into this system, I would probably be hurt in the long run. My friends and neighbors wouldn't even profit in the short term - they'd be hurt right away.

McChesney tried to excuse the price in a different way, by saying;

"When we're being invaded by another country, we don't say, 'well, can we afford to fight back?' You fight back, and worry about the cost later. Well, when you're losing your information system so you can govern your society, you don't say, 'Well gee, can we really afford that?' It's like, you don't exist if you can't afford it."

Oh come on, I thought these guys were supposed to be liberals. Fight a war with no regard for the cost? What if that cost included bankrupting all of our social safety nets, waterboarding the enemy or nuking an entire continent? There are different ways to fight back, some have higher costs then others. It's the same with keeping a free press.

McChesney and Nichols picked a single study in Baltimore that said most news stories are discovered by print media, and broadcast and Internet news organizations just repeat them. They are implying that if print went away, that broadcast and Internet media wouldn't change gears and we'd have no-one to find new news.

That's nonsense. If the dominant source of news went away, the other media would fill that gap. Maybe they wouldn't do it the same way as print, but it's hyperbole to say that our republic would crumble under any different system.

With all of this in mind, the system they have outlined wouldn't pass the cost-benefit test.

Consider the sources

I didn't want to start off by poisoning the well on McChesney and Nichols, but their solution to the newspaper problem makes more sense if you consider their backgrounds.

John Nichols was introduced on the program as a reporter. It didn't say that he's a reporter for The Nation, which makes him a left-wing political activist.

Besides being a college professor, Bob McChesney hosts the Media Matters weekly radio show. At first glance, I thought this put him in connection with the left wing watchdog group Media Matters for America. It turn they are separate groups. Not to worry, McChesney was the editor of the socialist journal Monthly Review from 2000 to 2004 and is still active with the publication.

Suddenly their support of an expensive government-funded newspaper industry makes a lot more sense.

*Please see the Feb. 16 entry for my take on PBS's introduction of John Nichols as simply a "journalist."


Friday, February 19, 2010

Cyber bullies push with lawyers

An acquaintance of mine is being threatened by a bully over the Internet, and I'm glad to see there are a lot of people coming to his defense.

Recently, college student Michael Hawkins had his Wordpress blog shut down. It took him a few days, but he found out it was because he had written that naturopath Christopher Maloney is not a real doctor.

He got an email from alternative medicine huckster Andreas Moritz boasting that he shut down the website, and will sue if Hawkins or any of his friends write any more blog entries about Maloney or himself. His reasoning is that although Hawkins said Maloney isn't a doctor, Maine does indeed define a naturopath as a doctor. Therefor, it's libel.

Whoa there, Andy. Let's slow down for a minute.

Tomatoes are legally defined as a vegetable, but every trivia buff over the age of 11 knows that tomatoes are scientifically classified as a fruit. If I was at dinner party and some squinty-eyed bore told me that, no, a tomato is a vegetable, because the 1893 Supreme Court ruling of Nix. v. Hedden said so, my stiff upper lip would be replaced with a condescending smirk.

Just like it doesn't matter that Illinois legislators passed a resolution classifying Pluto as a planet, the state of Maine's legal definition of what is a doctor has no relevance in a scientific discussion about whether a New England witch doctor is the same thing as an M.D.

Fortunatly for Hawkins, Moritz's bullying is attracting a lot of publicity to the incident. Popular science bloggers PZ Myers and Orac have joined in on the debacle, and Hawkins said he's gotten emails from some pretty big scientific figures, including Richard Dawkins.

If Hawkins plays this right, he can get himself a lot of positive attention while simultaneously telling the public that Moritiz and Maloney are ignorant oafs that shouldn't be trusted. He'll be able to reach a much bigger audience than if Moritiz had never opened this can of worms.

In light of all of this, I want to take the time to say that Andreas Moritz is more than just a bully. He is a danger to the desperate people he comes into contact with. Maybe he really believes in what he does, or maybe he's just another con man. I really don't know. What I do know is that he takes money from people and only gives them false hope in return. These poor people are put in further danger because his involvement can cause them to delay seeking real treatment. He is, without a doubt, a quack.


Wednesday, February 17, 2010

Is it hypocritical to use a program you oppose?

Not always.

As Greg Mankiw wrote this week, it wasn't illogical for Republican congressman to oppose the federal stimulus and then irrigate some of it into their own districts. This flawed criticism is one of the talking points Obama is repeating this week as we reach the one-year mark of the stimulus plan.

As Mankiw said:
I don't know the facts of the case, but the logic of the Democratic position baffles me. It seems perfectly reasonable to believe (1) that increasing government spending is not the best way to promote economic growth in a depressed economy, and (2) that if the government is going to spend gobs of money, those on whom it is spent will benefit. In this case, the right thing for a congressman to do is to oppose the spending plans, but once the spending is inevitable, to try to ensure that the constituents he represents get their share. So what exactly is the problem?
I have a very personal stake in the principle at hand. I am opposed to the extension in unemployment benefits that the Bush administration endorsed, as well as the increases the Obama administration encouraged. Despite that, when I was laid off I signed up for unemployment. Why isn't that hypocrisy?

For one, it would be a completely irrational course of action. Imagine being forced to buy a lottery ticket. Say the ticket costs $5, the jackpot is exactly $100 but the chances of winning are a paltry one in 1,000. I would never choose to buy that ticket, but if I was forced to by the government, would it make sense to refuse to cash in a winning ticket? No it would not. I'm still opposed to the system and its misplacement of incentives.

Granted, my view on the welfare system didn't survive my unemployment experience. My position had been that social programs like welfare, unemployment and disability benefit too many scammers. Not only do we have to pay for these people, but we also lose the taxes that they would otherwise pay.

I still believe that, but I was wrong to think there most of these people are gaming the public system. That's not the right way to look at this problem, because it assumes people are on welfare systems for the wrong reason. People are not on welfare because they are lazy; they are on it because they are smart.

As Milton Friedman explained on his Free To Choose miniseries, when you get a weekly paycheck for not working, it's irrational to take a job that pays less than that free paycheck. If you work, you lose the government assistance. Even a job that pays the same amount is off limits, because you'd be working for free.

But that doesn't mean any job that pays more than the government benefits is worth taking.

Let's say a person gets $300 a week for not working, and is offered a job that pays $400 and requires 40 hours a week.

Normally, we would say that job pays $10 an hour. However, because the cost of something is what you give up to have it, the wage of our subject is really $2.50 an hour. They will lose the $300 weekly government paycheck that required zero hours of work a week. In addition, they also have commute times and transportation costs like gasoline to factor in.

It's easy to see why someone with a lengthy promise of unemployment benefits would be encouraged to stay on it when faced with such an equation. If that person opposes the government program but still accepts the money offered, it doesn't mean they're hypocritical or lazy. It means they're smart.


Tuesday, February 16, 2010

Be cautious of anyone introduced as a journalist

I'm working on an entry about a proposal to preserve the newspaper industry with subsidies, and I couldn't help but notice that one of speakers was simply introduced as a "journalist."

Unlike a doctor or lawyer, there is no accreditation process for journalists. Anyone with a keyboard and a habit of speaking loudly can call himself a journalist. It doesn't mean they work for a media company like a newspaper or broadcast station.

The "journalist" label implies a sense of fair-handedness and impartiality, but that doesn't describe a lot of the people introduced as journalist today.

The popular definition of "journalist" is so broad and open-ended that it includes anyone who collects and presents information. I've seen a lot of cases where social activists introduce themselves as journalists. Social activists work to promote a specific world view, and it's dishonest to present them as anything else.

Even politically biased news sources, like MSNBC and Fox News, employ actual journalists who put real effort into presenting the different sides of an issue fairly. They don't always succeed, but it's a world apart from some of the stories published in the activist press.

There's no reason someone can't be both an activist and do reporting, but they should be upfront and honest about what they represent. Instead of being introduced as a journalist, why not try try "journalist from The Nation" or "journalist with the Socialist Party USA" to give a clue about what sort or organization they are associated with.

I was all set to give Naomi Klein partial credit for labeling herself as an activist and a journalist, instead of just a journalist. However, I checked the bio on her web site and found it simply fit the formula.
"Naomi Klein is an award-winning journalist, syndicated columnist and author of the New York Times and #1 international bestseller, The Shock Doctrine: The Rise of Disaster Capitalism."
Anyone who's even vaguely familiar with Klein knows she's an anti-globalization activist. There's no reason to believe that she sets out to present what multiple sides of an issue really believe. In fact, she does the opposite.

There is a better way to introduce these people. The profile page for Huffington Post contributor Jesse Larner* does not introduce him as a journalist, but as a writer on politics and culture. This is the correct way to go about these things, as there's no implication that Larner is shielding his own perspective, biases, opinions and beliefs.

Beware when someone is interviewed and you see that lone little "journalist" tag under their name with no media company attached. That doesn't mean they're lying or distorting details, but it does mean that you should Google their name to see what their real credentials and allegiances are.

*Larner shared the Cato Institute link in the previous paragraph during an e-mail exchange, so feel free to criticize me if I sound like his publicist here.


Friday, February 12, 2010

Happy Darwin Day

Today marks the 201st birthday of Charles Darwin.*

I guess last year's Darwin Day was a lot more spectacular.

*And therefore, the 201st birthday of Abraham Lincoln as well.


Wednesday, February 10, 2010

Buy the best deal

I have been watching volume 7 of Milton Friedman's PBS special "Free to Choose" about needless consumer protection and quality standards and it got me thinking about how it relates to localism.

One of the cases I often hear is that local goods are of a higher quality. Local crafts are always compared to lead-soaked Chinese sundries and local food to supermarket vegetables.

My replacement message to the "buy local" idea is to buy the best deal. This doesn't mean buy the cheapest price - that would encourage buying lousy goods. There is no simple formula for the best deal. The consumer simply has to weigh the quality of the product to the price, and decide how good the deal is for them.

The idea that locally-produced goods are of a higher quality is suspect. We know they are not taking advantage of economies of scale, so the quality-to-price ratio is already skewed in the wrong direction. There's no reason to believe a factory would produce a low quality good while a craftsman would make a better one. Henry Ford proved the opposite when standardized automobile parts made his assembly lines possible.

As for local food being "fresher," I've only heard that argued in theory and never with data to back it up. Yes, it makes perfect sense that a local grower could uproot a few carrots 10 minutes before the farmers market opens. But does that mean they will? What's stopping them from harvesting and washing their vegetables a few days before? Most farmers markets are only open one day a week, doesn't that mean the "freshness" selling point rapidly diminishes over the next six days?

Furthermore, some supermarket plants ripen during shipment. It's planned out. They also get new food in all week. I have a bag of supermarket carrots I've been eating for a few months now and they still taste just as good as when I bought them.

When someone is trying to sell me something and says it's "fresh," I feel like they're trying to trick me. The word now means it's not frozen or canned. Likewise, when something is judged in terms of freshness, it implies it tastes better. I've never really noticed a quality difference, and if there is one, it's too subtle for me to justify the price hike for local foods.

It's so condescending when the poorly-named "foodies" talk down about the rational, affordable good meals you eat and brag about their hand-made locally-grown organic crab apple chutney. I can understand why the sellers want to stress things like "freshness" as a selling point, but when the activists and food snobs do it, it just comes off as snobbery.


Sunday, February 7, 2010

Mankiw on judging presidents

In an excellent post, Greg Mankiw laid out why it doesn't make sense to judge a president's economic policy the way most of us do now:
"Even the best physicians have patients die. And even witchdoctors can have patients recover...Randomness is a fact of economic life, and it would be a mistake to judge a president by the economic outcome during his administration. It is better to look at the decisions the president made, and to acknowledge that the outcome is a function of those decisions and many other factors not under his control. As an economist, I have views about what best practices are for economic policy, and I judge presidents by how closely they adhere to those principles. "
Often, events on the macroeconomic scale are too difficult to disentangle from one another. It's very easy to judge a president by the economy during his time in office. However, the impact of the president on our economy is a lot smaller than most people think. Mankiw makes a strong case for gauging a presidents actions in an intelligent manner, instead of a simple one.


Saturday, February 6, 2010

Where is Downloadable Content headed?

I remember the good old days when on a whim, my Mom offered to buy my brother and me a Nintendo Entertainment System.

Video game purchases are a lot more complicated today. The current generation of console systems - ones like Xbox or Nintendo that play on a special machine as opposed to a home computer - are all able to plug into the Internet and gaming companies are able to sell downloads to players.

Downloadable Content, or DLC can take the form of an enhancement to a game - such as additional levels or items. DLC can also be entire games. There are a lot of small DLC-only games that have never been released on a disc. in addition, some older games that were released on disc can now be purchased digitally and downloaded.

Technology wise, this is great. Not only can DLC keep a game fun and playable longer, it gives developers longer to add to a game. Fans of the space opera Mass Effect had two different DLCs released with more alien-blasting adventures for $5 a pop. Cheap, short games are now possible, instead of the regimented $60 price tag.

But there's one big problem I have with DLC. It is not transferable.

As Hal Halpin, a video game consumer advocate, said in the October issue of Game Informer:
"...The downside may be that you sacrifice ownership rights. For $60, you've had a reasonable expectation that you'll own the game that you're buying. You can legally re-sell that game once you're done with it... With digitally-distributed content the question of what you bought comes in to question. In fact, the new question becomes if you bought it at all! It could be that instead of buying the game, you actually just licensed it."
For example, my friends and I have really gotten into Civilization Revolution for the Xbox 360 in the last few months. Because it's been out for a year and a half, it can be purchased from Amazon.com for $28 with free shipping. A used copy sells for $20 at Gamestop.

In addition, a digital copy can be downloaded onto the Xbox hard drive for $30. So far, it's a bad deal. In addition, the game takes up 5 gigabytes of hard drive space. Xbox hard drive space is tough to come by - a 20 gigabyte drive costs $45 and a 120 gigabyte drive costs $150. To simplify a complex problem, the game is occupying in the neighborhood of $6.25 to $11.25 of space. DLC can be deleted and reinstalled for free, but it incurs an unavoidable transaction cost - the slow speed of console downloads.

But even if they brought the download price for Civilization Revolution down to $10, I'd still find it a tough sell over a physical copy. You don't have the same rights with downloaded copy of a game that you do with a physical one. Because a downloaded game is married to your hard drive, it can't ever be sold or even lent to a friend.

DLC can also entangle a game to your hard drive like a tree growing in your yard. Sometimes disc-based games come with a one-time use code for DLC, like Fallout 3 Game of the Year edition. The game came out in 2008, and five DLCs were released for $10 each. In 2009 the game of the year edition was released as a $60 package that includes the original game and the five DLCs.

However, the five DLCs are not played on a disc. They still have to be saved onto the hard drive* where they stay forever. Indeed, once a person has a game with a few DLCs they can sell or lend the disc as much as they want, but the DLC stays in the hard drive like tree roots.

There's a lot more to this issue - a lot of video game enthusiasts allege that companies are removing the content of the disc in order to sell it by the download later. We're also seeing DLC levels come out the same day a game is released. Those are valid criticisms of business practices, but essentially this is the same as saying a game costs too much. As this is merely entertainment, consumers who don't like the price simply shouldn't buy the product.

I don't see any technological reason DLC resales couldn't become the norm. If enough consumers really care about the issue and made it known to the video game companies, you would expect it to materialize. As it stands today, there simply isn't enough demand for resales to make it a priority.

*Edit I have since learned that disc-based version of DLC, like the Fallout 3 edition I mentioned, do not have CD-keys to limit the download to the original customer. It turns out they can be copied unlimited times, possibly because the whole point of having them on a disc is for people without internet access, and the companies can't justify the cost of making an offline CD-key that can't easily be cracked. This changes my point that some DLC is stuck with the original customer, as disc-based DLC can be shared just as easily.


Wednesday, February 3, 2010

Destroying jobs is progress

This week the Maine Public Utilities Commission stood up to organized labor and supported installing "smart meters."

Central Maine Power wants to use federal stimulus money to install the new smart meters around Maine. Currently, members of the International Brotherhood of Electrical Workers drive around the state to read the meters in person. The smart meters are able to send that information directly.

But the union says this will destroy 141 meter reading jobs. They argue that the stimulus plan is supposed to save jobs - not destroy them.

There's a lot of bean counting on the national stage about how many jobs are filled in America. Unfortunately, the focus is simplistic. Unproductive jobs like meter readers do not help the economy. Smart meters are expected to lower Maine's electric bill by $25 million over the next two decades. Does it make sense to keep paying that money to avoid destroying jobs?

Imagine that there is a community somewhere in New England that still employs milkmen. Instead of buying milk at a store, customers get home milk deliveries in glass bottles, and leave the empties on their doorsteps.

What would happen if a large dairy wanted to start selling plastic jugs of milk in this community?

You would expect the milkmen to complain that they'll be out of work. However, destroying outdated jobs is a part of progress. Milkmen, wagon wheels and diving bells have all dried up in a process called creative destruction. The customers who buy milk at the store will save a lot of money with the new system.

What would happen if the plastic jugs came in, and a group of milkmen started a social movement to bring back the old system? You would expect them to dig up some argument about plastic jugs being unhealthy. You would then hear that banning plastic jugs will create jobs - milkmen jobs - in the community. Some of their arguments would be indistinguishable from the "Buy Local" movement. They would argue that using milkmen will keep money in the community, instead of going to an out-of-town dairy corporation. Side industries, like glass bottle making, would flourish. They would say this would create a local flavor and give consumers more choice over where their milk comes from.

But we know it's not sensible to have people truck bottles of milk around in fragile, glass containers. We know its cheap and convenient to use plastic jugs. Likewise, it makes perfect sense to use smart meters instead of paying people to drive around and read them in person. It's been 200 years since the Luddites argued that machines will destroy all of our jobs and it still hasn't happened. The money people save creates new industries and new jobs.

Suppose the smart meters were already in place, would it make sense to reinstall the old meters in order to create 141 meter reader jobs? If that doesn't make sense, it doesn't make sense to avoid installing them now.


Tuesday, February 2, 2010

Does buying local help recover disaster areas?

A friend who visited New Orleans recently said there is a strong "buy local" movement there, with the added kick that it will help the city recover from the damages of Hurricane Katrina.

I freely admit it took me a little time to sort out the fallacy, but I see no reason why recovering from a disaster would change the economic principals here. Since the buy local philosophy doesn't improve a stable economy, why would it help one with a major setback?

There is no such thing as "keeping the money in the community." Money is just a means of exchange. It's important to look not only at the money the merchants are taking in, but also the money the customers are spending. If the people of New Orleans buy local goods at a higher price, they will be poorer than if they had brought from afar.

Why would a disaster change anything? There are other ways to recover, such as borrowing money from a bank.

But there is a silver lining here. As long as consumers outside of the disaster area feel emboldened to help New Orleans recover, city merchants can use that good will to their own advantage. Slapping a "Support New Orleans" label on a product from the area can attract charitable customers from outside the city. This will give an aesthetic advantage to New Orleans products.

However, once they get that money, businesses should resist the urge to buy exclusively from one another. Instead, they should buy whatever is the best deal for their own business. If this means buying from a local person, all the better. If the best deal is from a different state or country, then they should feel no shame in taking it.

This means resources will come into the area at a normal rate, but bring in more money when they leave the area. New Orleans businesses will build up money, but see no increase in their expenses.

So back to the original question, an internal "buy local" movement will not help New Orleans recover, but a "buy New Orleans" movement aimed at everyone outside the city will.

By the same token, the people of Haiti can help draw wealth to their area if they use a "Buy Haitian" advertising scheme to sell goods abroad. This may come as a shock to the people who are offended that cruise ships still want to stop there. Perhaps they believe it will offend the earthquake gods if wealthy tourists spend their money at Haitian resorts or buy trinkets from Haitian artisans.

Please note, there is no silver lining from the damages in either New Orleans or Haiti. Yes, Gross Domestic Product rises after a disaster because things have to be built to replace demolished goods. However, this is not a stimulation of the economy.

As Frédéric Bastiat wrote, it wouldn't make sense to burn down Paris to stimulate jobs in rebuilding houses. In his parable of the broken window, he argued that while a broken shop window would mean more work for the glass maker, that positive effect comes at the expense of the shop owner. He could have spent his money at the tailors instead. The economic stimulus looks the same - a business owner in town takes the shop owners money - but instead of the shop owner possessing a new suit, he had to spend his money on getting his window replaced.

I don't hear anyone saying Hurricane Katrina or the earthquakes were good for those economies.


Monday, February 1, 2010

Mike Munger spotted

It just came to my attention that the limo driver at the 1:11 mark in the "Fear the Boom and Bust" econ rap video was none other than Mike Munger of Duke University and Kids Prefer Cheese fame.

Lyrics and a free mp3 are available here.

I've been enjoying this song for the past week, but I'm worried that it gives the impression that Hayek decidedly won the intellectual battle. While I am a fan of Hayek's work and policy recommendations, I also respect Keynes as an important economist. While I like Keynes progress in economic science more than his policy recommendations, it's no secret that his policy recommendations are alive and well today.

By going second and not having a Keynesian rebuttal, the song helps reinforce my existing bias that Keynesian solutions are flawed and should be avoided. I'll be interested to hear how modern Keynesians respond to the song.

Hayek himself claimed that Keynes planned to rework his positions and reel in his own supporters shortly before he died, as the two discussed over lunch six weeks before Keynes untimely death. Sadly, without verification such claims are not acceptable in scientific discussions. I still enjoy the story because it demonstrates that even though these two had fiercely combative philosophies and scientific views, they were able to meet together peacefully over a social lunch.